Initial jobless claims in the United States fell to their lowest level since January, but don't get excited. Seasonal distortions related to the auto industry skewed the reading, making things look better than they actually are.
On Thursday the Labor Department reported first-time claims for unemployment benefits last week fell by 52,000 to 565,000, well below the 605,000 figure Wall Street had expected. The problem is seasonal factors had anticipated a big jump in claims due to the annual downtime at auto factories. (See "Ignore July's Unemployment Numbers.")
"Because many of these autoworkers have already been filing for unemployment benefits over the prior several weeks, the seasonal factors were looking for a big jump in new filings that mostly didn't materialize," Michael Feroli, a senior economist at JPMorgan Chase. In early May, Chrysler declared bankruptcy, leading it to suspend operations at all its plants, while
The problems experienced with the automakers have extended to auto parts suppliers.
Understanding seasonal factors helps explain why the non-seasonally adjusted figure increased by about 17,000 to 577,506 initial claims, and why continuing jobless claims unexpectedly jumped to a record high. The Labor Department noted the distortion, but with the data in hand it's impossible to measure exactly how much of the drop is due to the auto industry, Feroli said.
Last month the government reported the unemployment rate rose to 9.5%, while Joe LaVorgna, chief U.S. economist at Deutsche Bank, expects the jobless-roll to reach 10.0% by the end of the year, and eventually rise to 10.5% in 2010. (See "Economy Grows, Recession Remains." and "The Job Market's Grim Picture.")
